TeachStreet laid off four employees on Monday, a move that oddly comes just a few days before the Seattle online directory of teachers is expected to close an inside round of financing.

Chief Executive Dave Schappell said the layoffs -- accounting for about 30 percent of the full-time and contractor staff -- were necessary in order to extend the new cash infusion for as long as possible.

"The financing round is a huge positive, but it makes me feel a little bad saying that for the people who have left because for them in the short-term it is not a huge positive," said Schappell. "But we think it gives us the best chance of being successful over the medium to long-term, the one to five year time frame." 

To date, TeachStreet has focused on building out new markets rather than monetization. It operates in six cities, with Chicago launched just last night. The site is attracting about 125,000 unique visitors a month, he said.

TeachStreet, whose free directory allows people to search for music, yoga, dance and other types of instructors, plans to begin rolling out premium services in the next two months. Those will include payment services so that instructors will be able to charge students directly through the site.

Schappell

The layoff was not a condition of the new capital, with Schappell saying that it was his idea.

"This was the smartest way for us to proceed because it is the least amount of dilution to get to our next big milestone, which is proving out the economics of the model," he said.

Madrona Venture Group led a $2.25 million venture round in TeachStreet in February 2008. Schappell said it was a tough decision to lay off employees, but added that staffers are moving forward.

"It was a sad day on Monday, but we are really excited today," he said.